The adviser to the local government argues for imposing a tax on consumers instead of producers, because this would "spare producers from the negative impact of the taxes." An appropriate response (from an economic perspective) would be to say that a. This is correct as long as the substitution effect is stronger than the income effect b. This is incorrect, because taxes are money that goes to the government c. This is incorrect, because both, producers and consumers are affected by a tax independent of whether the tax is imposed on consumption or production d. This is incorrect, because a tax on consumption affects producers even more than a tax on production
The adviser to the local government argues for imposing a tax on consumers instead of producers, because this would "spare producers from the negative impact of the taxes." An appropriate response (from an economic perspective) would be to say that
a. This is correct as long as the substitution effect is stronger than the income effect
b. This is incorrect, because taxes are money that goes to the government
c. This is incorrect, because both, producers and consumers are affected by a tax independent of whether the tax is imposed on consumption or production
d. This is incorrect, because a tax on consumption affects producers even more than a tax on production
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
